Need help with your R&D lodgement?

What is R&D Intensity?

What is the R&D Intensity Calculation?

What are the R&D Intensity Rates

If you are below $20M, the rate is 18.5%

Worked Examples

Example 1:

Company Details:

• Total Expenditure: $5 million
• R&D Expenditure: $50,000

R&D Intensity: = $50,000 / $5,000,000 = 1%

As the intensity is below 2%, all R&D expenditure is calculated at the 8.5% rate.

R&D Tax Offset: = $50,000 * 8.5% = $4,250

Effective R&D Rebate Rate: 8.5%

Example 2:

Company Details:

• Total Expenditure: $5 million
• R&D Expenditure: $100,000

R&D Intensity: = $100,000 / $5,000,000 = 2%

Again, as the intensity is 2%, all R&D expenditure is calculated at the 8.5% rate.

R&D Tax Offset: = $100,000 * 8.5% = $8,500

Effective R&D Rebate Rate: 8.5%

Example 3:

Company Details:

• Total Expenditure: $5 million
• R&D Expenditure: $500,000

Calculation for R&D Intensity below 2% (First $100,000): = $100,000 / $5,000,000 = 2%

R&D Tax Offset for the first 2%: = $100,000 * 8.5% = $8,500

Calculation for R&D Intensity above 2% (Remaining $400,000): = $400,000 / $5,000,000 = 8%

R&D Tax Offset for above 2% intensity: = $400,000 * 16.5% = $66,000

Total Rebate Amount: $8,500 + $66,000 = $74,500

Effective R&D Rebate Rate: $74,500 / $500,000 = 14.9%

Example 4:

Company Details:

• Total Expenditure: $5 million
• R&D Expenditure: $1 million

Calculation for R&D Intensity below 2% (First $100,000): = $100,000 / $5,000,000 = 2%

R&D Tax Offset for the first 2%: = $100,000 * 8.5% = $8,500

Calculation for R&D Intensity above 2% (Remaining $900,000): = $900,000 / $5,000,000 = 18%

R&D Tax Offset for above 2% intensity: = $900,000 * 16.5% = $148,500

Total Rebate Amount: $8,500 + $148,500 = $157,000

Effective R&D Rebate Rate: $157,000 / $1,000,000 = 15.7%

Level of Compliance Keeping You Up at Night?

Sleep better knowing you’re fully compliant.

Schedule a meeting to get a comprehensive compliance check

that will put your worries to rest.

Background

The research and development premium will provide different rates of non-refundable R&D tax offsets, increasing with the R&D intensity.

For companies over $20M in revenue, the R&D tax incentive rates are: with an aggregated turnover of $20 million or more, the Government will introduce a two-tiered premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of the R&D expenditure as a proportion of total expenditure for the year.

The new rates will be the claimant’s company tax rate plus:

• 8.5 percentage points for R&D expenditure up to 2 per cent R&D intensity
• 16.5 percentage points for R&D expenditure above 2 per cent R&D intensity

The cost of the R&D Tax Incentive was expected to be $1.8 billion per year when it was introduced in 2011-12 but in 2016-17 it cost around $3 billion. With the total handed out so far of around $6.1 billion.

The 2016 review of the R&D Tax Incentive found that the program is failing to meet its objectives of encouraging additional R&D and generating the associated flow-on benefits for the Australian economy.

The Review found that among larger companies, those with higher R&D intensity provide the greatest benefits to the Australian economy.

Encouraging more companies to increase their R&D intensity and undertake additional R&D activities is a key objective of the R&D Tax Incentive.

Understanding the R&D Intensity Premium

The R&D Intensity Premium is designed to offer differentiated rates of non-refundable R&D tax offsets, with the value increasing based on the company’s R&D intensity. Essentially, as a company invests more into R&D relative to its total expenditure, the benefits it receives under this scheme also grow.

For businesses reporting over $20M in annual revenue, there’s a nuanced structure to this incentive:

• If your R&D expenditure comprises up to 2% of your total yearly expenditure, you’ll receive a tax offset rate that’s 8.5 percentage points above your corporate tax rate.

• Expenditures above this 2% intensity threshold benefit from an even more generous rate — 16.5 percentage points above the corporate tax rate.

Why the Change in R&D Tax Incentive?

When the R&D Tax Incentive was launched in 2011-12, its annual cost projection stood at $1.8 billion. However, by 2016-17, the program’s expense had surged to nearly $3 billion, with an aggregate cost of about $6.1 billion since its inception.

An extensive review in 2016 revealed that the incentive wasn’t effectively promoting additional R&D investments, nor was it fostering the anticipated economic benefits for Australia. Importantly, it was observed that companies with a higher R&D intensity contributed most significantly to the national economy. Therefore, refining the R&D Tax Incentive to promote greater R&D intensity became an essential aim.

Unlock the Full Potential of Your R&D Claim

Navigating the R&D Tax Rebate landscape is no straightforward task. It demands a fine balance between maximising your legitimate claims, maintaining stringent compliance, and prepping for possible ATO audits.

Why choose Bulletpoint for your R&D needs?

 Maximise Your Claim: We dive deep to identify every eligible R&D activity and associated expenditure, ensuring no rebate opportunities are missed.

 Stay ATO-Compliant: With the ever-shifting landscape of R&D legislations and guidelines, our expertise keeps you compliant and reduces future risks of adjustments.

 Be Audit-Ready: In the event the ATO decides to take a closer look, our robust documentation review ensures you’re well-prepared and in a solid position.

Your R&D tax claim can be a significant asset – but only when managed right. So, why leave it to chance?

Unlock the true value of your R&D claim with Bulletpoint.

 Call us now at 1300 658 508
 Schedule a meeting to discuss your needs
 Or drop us a quick message and we’ll respond swiftly.

At Bulletpoint, we believe it’s not just about claiming, but optimising. Let’s embark on this journey together.